Restructuring and insolvency
09 December 2010
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Chapman Tripp comments on recent cases, legislation and insolvency law reform.
26 March 2012
Making a payment to a creditor (in this case, the IRD) will in and of itself give that creditor priority over competing creditors. A recent Court of Appeal judgment to that effect, under section 95 of the Personal Property Securities Act (PPSA), carries serious implications for receivers.
The ruling suggests that the receiver has to choose between two risks – the risk of incurring penalty payments or the risk of conceding PPSA priority status unnecessarily. We suggest ways to escape this dilemma...
21 February 2012
The Law Commission is looking into whether the regulation of trading trusts gives enough protection to creditors and beneficiaries in circumstances of insolvency.
Submissions are due on the issues paper by 2 March 2012.
13 February 2012
Recent decisions from the courts have raised the legal risk for directors and underlined the exposure to third party liability of auditors, trustees and promoters.
As a result, we can probably expect this year to have more claims made by receivers, liquidators and out-of-pocket investors against those involved in: company governance and management; prospectus preparation; and the provision of professional services. So who is potentially in the gun, and why?
22 December 2011
Section 9 of the Law Reform Act 1936, recently the subject of the somewhat controversial Steigrad decision, has been held to apply to contracts of reinsurance in a High Court judgment delivered earlier this month.
08 December 2011
The Supreme Court has affirmed the Court of Appeal’s finding in August of this year that a voluntary administrator may only use a casting vote at a watershed meeting where the number of creditors voting for and against a proposed deed of company arrangement is equal.
The requirement that the 50% of creditors in number also represent at least 75% in value cannot be the subject of the casting vote. Nor can the casting vote be used to choose between the number and the value.
06 December 2011
Receivers cannot escape personal liability on contracts they cause the company to enter into simply because all of the company’s assets have been paid out. So the Court of Appeal found last week in a decision which explored the application of limitation of liability clauses where, as is common practice, the liability is limited to the “available assets” of the company.
28 November 2011
The Insolvency Practitioners Bill is now unlikely to come into force until early 2013 due to the disruption caused by the election. The Finance and Expenditure Select Committee’s report on the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Bill will also be delayed until next year.
07 November 2011
A lien is the right to hold on to goods, and in some cases sell them, in order to ensure payment. Often the debt will be connected with services related to the goods. A lien can be obtained by contract, or in certain specific situations the law creates it automatically. The difference can be significant. Under the Personal Property Securities Act (PPSA), the holder of a common law or statutory lien may in some cases have special priority over a company’s secured creditors.
13 October 2011
The long-awaited Commerce Committee report into the finance company failures has found that most of the holes in the regulatory net have already been filled, or should be addressed through the Financial Markets Conduct Bill (FMC Bill).
This was a risk we identified in our earlier Brief Counsel, given the busy legislative programme in the capital markets area, and was not helped by the fact that the Committee laboured over its task for more than two years and had to call extra time when Committee Chair Lianne Dalziel was called away by the Canterbury earthquakes.
This Brief Counsel comments briefly on the Committee’s recommendations.
12 October 2011
Resource consents and environmental risks can affect the value of an insolvent business and give rise to civil or criminal liability.
This Brief Counsel examines: when resource consents require transfer to a new owner, and potential liabilities that insolvency practitioners may face.
16 September 2011
A shock ruling this week by the Auckland High Court casts doubt on the extent to which directors can rely on their liability cover to help pay for defence costs in criminal and civil proceedings.
This Brief Counsel summarises the decision and comments on its implications for directors.
06 September 2011
The Court of Appeal has affirmed the High Court’s ruling that a voluntary administrator may only use a casting vote where the number of creditors voting for and against the resolution is equal.
The second limb of the test, that the 50% represent at least 75% in value, cannot be the subject of the casting vote. Nor can the casting vote be used to choose between the number and the value.
The Court also confirmed that, where a voluntary administration is a substitute for liquidation, a Deed of Company Arrangement (DOCA) should provide for preferential creditors to be treated as they would in a liquidation.
We understand that the Court of Appeal decision may be appealed to the Supreme Court.
24 May 2011
Chapman Tripp has taken the opportunity to comment on the Select Committee’s proposed amendments to the Insolvency Practitioners Bill.
11 May 2011
Registration will be mandatory under the Insolvency Practitioners Bill as reported back to the House by the Commerce Committee. This is a radical and far-reaching change from the negative licensing regime initially proposed in the Bill.
This Brief Counsel summarises and comments on the Committee’s report.
18 April 2011
Claims alleging breaches of duty by receivers rarely come to court so a recent and detailed High Court decision is welcome, particularly for the guidance it gives practitioners on: the duty to verify the validity of their appointment; the duty to achieve the best price reasonably obtainable; and the ability to retain funds at the conclusion of a receivership to meet anticipated litigation costs.
10 March 2011
Australia has deferred the introduction of the Personal Property Securities Act and associated register from May until October.
22 February 2011
The recent High Court decision to award costs against the receivers of Five Mile Holdings Ltd, in addition to the company against which the proceeding was taken, has implications both for receivers and for stakeholders in a receivership. This Brief Counsel backgrounds the case and comments on its wider relevance.
01 February 2011
Issuing businesses with a single identification number would make it more difficult for entities to hide behind a change of name and would be particularly useful if it were included on the Personal Property Securities Register, Chapman Tripp partner Michael Arthur said today.
09 December 2010
Chapman Tripp partner Michael Arthur explains the implications of bankruptcy and the constraints it places upon an individual.
03 December 2010
Lenders can have more certainty around their obligations under the Credit Contracts and Consumer Finance Act after the Supreme Court today found by unanimous decision that GE Custodians had no culpability in the ‘Bartles - Blue Chip’ case. This Brief Counsel looks at the judgment and at its implications.
23 November 2010
The strength of the protection that the Personal Property Securities Act 1999 (PPSA) offers the recipients of monies paid by an insolvent debtor was tested recently in Stiassny and Ors v Commissioner of Inland Revenue – and failed to support the IRD’s right to retain funds paid to it. This Brief Counsel looks at the judgment and examines its implications for the PPSA.
10 November 2010
The longstanding view that liquidators are not personally liable for litigation costs has been reaffirmed in two recent decisions, one from the Supreme Court and the other from the High Court. This Brief Counsel looks at the two cases.
08 November 2010
The finance company collapses have led out-of-pocket investors to seek recourse from their financial advisers’ insurers instead. This Brief Counsel looks at when and how such claims might succeed – and finds that, as usual, the devil is in the detail.
12 October 2010
Chapman Tripp has made a submission on the Insolvency Practitioners Bill to the Commerce Select Committee, strongly supporting the proposed amendment to s280(1)(cb) of the Companies Act 1993.
05 October 2010
Submissions on the Insolvency Practitioners Bill, which has been referred to the Commerce Committee for public consultation, close on 12 October 2010 (next Tuesday).
05 August 2010
A Court of Appeal finding late last year that a director breached his director’s duty by selling an asset in a failing business when he knew that the company would be unable to meet the ensuing GST obligation has since filtered through into IRD practice. It is important, therefore, that directors are fully alert to the decision’s implications. This is particularly so as the monies involved in GST cases will become relatively larger after 1 October this year when GST rises to 15%.
04 August 2010
The Personal Property Securities Act (PPSA) presents risks to creditors who do not take steps to protect themselves. These risks are not difficult to circumvent but still seem not to be understood by many. With Australia scheduled to adopt a PPSA next year, we thought it timely to recap on some PPSA basics, look at what the New Zealand Courts have said and examine the impact of the Australian legislation. This is the first in a series of three Brief Counsels on this issue.
12 July 2010
New Zealand’s courts have only very recently acknowledged that banks could be liable as shadow directors in the right circumstances - see our previous analysis of the Krtolica case here. Now, the New South Wales Supreme Court has considered whether the same liability could apply to creditors of distressed companies where they exert pressure to recover outstanding debts. On the facts, no liability arose in the Australian case, but the judgment once again highlights the risks taken by third parties who become involved in the affairs of their debtors.
07 July 2010
A recent District Court decision has confirmed that deeds of company arrangement (DOCAs) cannot be used to release directors from personal liability unless the creditors expressly relinquish the guarantees and vote in favour of the DOCA. The New Zealand case is the first to consider the issue and reflects the High Court of Australia’s judgment in Lehman Brothers.
01 June 2010
The High Court, ruling last week on the first case to be brought under the Deed of Company Arrangement (DOCA) provisions in the voluntary administration regime, has provided useful guidance to insolvency practitioners on how to run a watershed meeting and how to draft a DOCA. This Brief Counsel looks at the implications of the decision, and questions whether the result is correct.
19 May 2010
The Court of Appeal judgment in favour of Blue Chip victims, the Bartles, carries a caution for lenders in the finding that the loan contract entered between the Bartles and GE Custodians Ltd is oppressive within the meaning of the Credit Contracts and Consumer Finance Act and can be re-opened.
28 April 2010
Liquidators, administrators and receivers who are delinquent in their duties will be liable to be stood down or placed under supervision by the Registrar of Companies under the Insolvency Practitioners Bill tabled in Parliament yesterday.
19 April 2010
Former Justice ministers Sir Douglas Graham and Bill Jeffries could face up to five years in prison if they are found guilty of misleading investors in the collapsed finance company, Lombard Finance. Chapman Tripp Partner Roger Wallis discusses the case on Radio NZ National's Morning Report programme.
17 December 2009
The government this week moved to tighten the rules around the use of moratoriums by finance companies. Chapman Tripp Partner Roger Wallis talks about the changes in the context of Hanover, which went into moratorium a year ago.
17 November 2009
A recent Australian Federal Court judgment arising out of the Lehman collapse has established that a Deed of Company Arrangement (DOCA) cannot bind a company’s creditors insofar as the DOCA purports to release third parties from liability. The decision is likely to be followed in New Zealand given the level of similarity between the DOCA regimes in New Zealand and Australia. This Brief Counsel considers whether Part 14 of the Companies Act 1993 (Compromises with Creditors) is likely to be interpreted as granting the requisite power to creditors to release third parties from liability.
02 November 2009
Banks and others who take security in Australia will need to proceed cautiously pending a final decision on the Octaviar appeal – a process that could take several months. This Brief Counsel looks at the case and explores some of the implications for secured creditors.
01 November 2009
Voluntary administration is a new process. It was introduced from 1 November 2007. This article examines the process and explains the benefits and risks to be aware of.
06 October 2009
A recent High Court decision has delivered an important reminder that, although a trading trust can provide a useful mechanism to shield assets from creditors, it does not exempt directors from the duty to protect creditor interests.
29 September 2009
Yes, receivers can sell copyright goods even without the consent of the copyright holder provided the goods are genuine and were legitimately acquired and subject of course to the usual priority rules. These parameters were established in a recent High Court decision. This Brief Counsel looks at the case and what it may mean for others.
24 September 2009
The order by the High Court that a financial adviser pay almost $260,000 in damages to an elderly widow whom it advised to invest in a Blue Chip scheme is unlikely to set a strong precedent for similar claims in our view. This Brief Counsel discusses the case and its potential implications for others.
01 September 2009
The Government announced last week that the Crown Retail Deposit Guarantee Scheme, which expires on 12 October 2010, will be extended. The extended scheme will commence on 13 October 2010 and end on 31 December 2011. Institutions will have to re-apply if they wish to participate in the extended scheme, but not all institutions currently covered by the existing scheme will be eligible.
26 August 2009
The Commerce Select Committee inquiry into finance company failures will mean yet more change in a sector which is already reeling under a tidal wave of legislative and regulatory reform. But, while the Inquiry will mean more uncertainty, it also offers some opportunities. This Brief Counsel looks at the TOR and offers some observations and analysis.
24 August 2009
The law firm that advises a number of distressed finance companies operating under moratorium is welcoming Parliament's decision to hold an enquiry into finance company failures. Chapman Tripp's Roger Wallis talks to Corin Dann on NZI Business.
20 August 2009
“The Commerce Committee inquiry into finance company failures will provide a welcome opportunity to correct some misperceptions about moratoria and – perhaps – to revisit some earlier policy decisions,” says Roger Wallis, a partner at Chapman Tripp.
26 June 2009
The credit crunch and the international financial crisis are driving real, fundamental change across financial institutions, business, regulators and professional services organisations. Financial restructuring is often traumatic, but companies that restructure effectively in difficult periods can emerge and succeed. The imperative from a policy perspective, therefore, is not to protect the economy against change but to avoid unnecessary casualties.
05 May 2009
Voluntary administration was introduced to New Zealand about 18 months ago. As of 28 April 2009, 42 companies had entered voluntary administration, with 16 of these companies entering a deed of company arrangement. This Brief Counsel examines New Zealand's experience with voluntary administration.
31 March 2009
This article identifies some of the practical issues receivers and administrators face when they continue to employ staff and provides strategies to mitigate these risks.
23 January 2009
As the recession bites, financiers, and in particular their internal recovery teams, are likely to become more involved in the businesses of clients under pressure as they seek to mitigate their losses from insolvency. As a financier’s involvement increases, so does the danger that it may become exposed to liability as a shadow director.
27 February 2008
Chapman Tripp’s Restructuring and Insolvency Group acted for BDO Spicers, the voluntary administrators of Icon Digital Entertainment Ltd.
01 December 2007
Parliament’s efforts to improve New Zealand’s corporate insolvency laws finally came into effect on 1 November 2007. The Companies Amendment Act 2006 has ushered in the voluntary administration regime, prohibitions on phoenix companies, further restrictions on those qualified to act as liquidators and various improvements, or at least amendments, to the liquidation rules.
01 October 2007
The recent "credit crunch" in global financial markets and the flurry of local finance company failures give cause to remind directors of the need to bear in mind their specific duties in insolvency or near-insolvency situations.